- SALT allows users to take out cash loans backed by the tokens they hold
- Everex shines in small cross border transactions
- Main weakness of both projects is high interest rates on loans
The last few years have seen an explosion in proposed use cases for crypto and Blockchain, and in projects exploring them all. Smart contracts are allowing for perfect transparency and the removal of human involvement in the execution of contracts.
It is one of these use cases we will be taking a look at today – lending platforms on the Blockchain. With centralized institutions like banks cut out of the picture, is it possible to create private lending that works as well for both lenders and borrowers as bank loans do?
SALT – Crypto Backed Cash Loans
With the awesome growth of the crypto market cap in recent years, and with many of the foremost experts in the space predicting even more growth in the future, most people in crypto are loathe to sell off their tokens – even with the market we have in 2018.
Even so, sometimes you might be in need of fiat money. SALT (SALT) allows you to leverage your Bitcoin holdings to secure cash loans – and if the price of Bitcoin were to skyrocket before you have paid your loan back you do not have to worry about losing out, as you would if you had simply sold to fiat.
Because all loans through SALT are fully collateralized, users’ credit history is not held against them. On the other hand, no matter how good your credit history is, it also will not give you an advantage.
Originally the SALT platform determined the conditions of your loan by membership tiers – with users paying higher SALT fees for membership getting more favourable loans. As of August they are moving to a staking model – which still rewards early adopters and large investors, but without the fees ticking away whether you are using the platform or not.
Although crypto is global, SALT is not (yet). The project focuses on the US, where to date it has issued more than $50MM in blockchain-backed loans. International expansion is on the road map, however.
Everex – Microfinancing and Global Transfers
Everex (EVX) by contrast casts a wider net – one of the first companies to build on top of Ethereum, they are based in Singapore and Thailand and specialize in remittances, merchant payments and microloans.
Unlike SALT, the Everex platform does make use of an internal credit score – although users can enhance their score by purchasing Everex tokens on the open market.
Tokens are also issued as rewards for users of the platform who pay back loans on time. These rewards raise your credit score – or you can sell them to someone who wishes to raise theirs.
Finally, the Everex team has made an ongoing commitment to dedicate 20% of their net profits to buying back their own tokens, shoring up the price and mitigating any potential crashes.
Aside from loans, Everex also offers tokens pegged to various fiat currencies for cross border transfers – allowing migrant workers to send money back to their families faster and at rates much lower than those offered by traditional financial institutions.
The Everex Edge
Ultimately, while both projects offer loans in the crypto space, the two are appealing to mostly separate users, so they are not in direct competition.
What we can say after looking into both is that while SALT targets a perfectly legitimate niche – crypto holders who do not want to sell to fiat, we are not seeing enough use for the token to increase demand that much.
If the price went up, anyone who could afford to buy enough tokens for a significantly lower interest rate would not desperate enough for a loan to accept the 10% interest rate charged for loans on the platform.
While a 10-20% interest might be well worth it to hold on to your tokens in the middle of a bull run, it is not quite so attractive when the price of crypto is stable (or in decline), making it difficult for the project to see much adoption except during periods of strong growth for the whole crypto space.
To be sure high interest rates is a red mark against Everex as well, but that platform can function and see reliable demand in any market due to its very affordable remittances.
Interest Rates the Main Weakness
Ultimately, there is plenty of room for both projects – and many others like them. But the volatility of crypto and the disconnect from traditional credit history controls lead to a tricky dilemma.
Either you force borrowers to put up a large collateral – more than the value of the loan, in fact, to prevent the collateral from dipping under the cash value of the loan if the market goes down, or you charge exorbitant fees, as has been an issue with microloans since long before crypto.
It is possible to earn a steady small interest on your holdings in crypto – and very likely as the market matures more reasonable interest rates (For lender and borrower both) will come to lending platforms as the space matures. But at this early juncture we must give Everex the upper hand in this comparison largely because their platform offers more than loans.
